Saudi Arabia has taken oil market 'hostage', Iran says

Muriel Colon
September 17, 2018

Emirates National Oil Company (ENOC), another buyer of Iranian condensate, has been asked by the UAE government replace Iranian supply with imports from other countries, one of the sources said.

Washington will consider waivers for Iranian oil buyers such as India but they must eventually halt crude imports from Tehran, US Secretary of State Mike Pompeo said last week in New Delhi after a meeting of high level officials.

Under the U.S. pressure to lower oil prices, the OPEC and its allies agreed in June to boost production, having participated in a supply-cutting deal in place since 2017. There are now eight tankers holding 14 million barrels of Iranian crude or condensate, a form of light crude extracted from gas fields, anchored in the Persian Gulf.

The U.S., in news that was widely covered by media at the time, bypassed Saudi Arabia in February to become the second largest global oil producer, the EIA says.

Brent crude oil futures pulled back on the reports of additional tariffs, dropping 9 cents a barrel to settle at $78.09.

The EIA expects that US crude oil production, most of it light sweet crude, will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019.

Washington reimposed some of the financial sanctions from August 6, while those affecting Iran's petroleum sector will come into force from November 4.

"While oil prices are higher this week, volatility will stay despite the obvious supply drop among some OPEC members such as Iran, as the trade conflict between the world's two biggest economies is still in play", Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. However, the increase in production came from higher output in Iraq, Libya and Nigeria. Despite that fact, there are many risks that have caused the downfall in prices.

Iran's exports so far this month slumped to around 1.3 million barrels a day.

After the June meetings between OPEC and its friends there was a flurry of talk about restarting production at the fields in the Neutral Zone, shared between Saudi Arabia and Kuwait, but there has been little activity on the ground. Despite the rise, oils prices fell again on Thursday.

In theory Saudi Arabia could immediately raise output to 11.5 million barrels a day-that's what Crown Prince Mohammed bin Salman told Bloomberg in April 2016.

Elsewhere in his remarks, Kazempour Ardebili suggested that a deal reached between OPEC and non-OPEC producers in 2017 over production ceilings had already lost effect.

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